We live our values and believe we have a moral and ethical obligation to treat those being screened according to the same standards as our clients.

ESR News Blog

Court Holds Federal Fair Credit Reporting Act Is Constitutional and Does Not Violate First Amendment

A large background screening firm facing a class action lawsuit alleging inaccurate reports in violation of the federal Fair Credit Reporting Act (FCRA) failed in its attempt to have the FCRA declared unconstitutional on the basis that it violates the right to free speech under the First Amendment. A Pennsylvania federal court ruled on November 6, 2012 that the FCRA was constitutional since it regulated information disseminated for private purposes for a fee, and not to the public. More information about the ruling is available at http://www.paed.uscourts.gov/documents/opinions/12D1046P.pdf.

The FCRA is the federal law that regulates background checks. The lawsuit alleges that the screening firm provided inaccurate reports by providing a prospective employer with information on past arrests that were dismissed and were older than seven years, which is prohibited by FCRA section 605 (U.S.C 1681c). That law prohibits a background firm, known as a Consumer Reporting Agency (CRA) from providing arrests records to employers that are more than seven years old. There is an exception, however, if the annual salary is expected to be $75,000 or more a year.

In this case, the lead plaintiff in the class action lawsuit alleged that the CRA reported ten cases older than seven years where she was arrested but no prosecutions occurred. It appears that the parties agreed with the fact that the arrests too old to report under the FCRA. However, the CRA argued that the FCRA itself was unconstitutional since it violated the CRA’s right to free speech.

The CRA contended that a 2011 U.S. Supreme Court case on commercial speech marked a major change in the protections provided to commercial speech and required a court to apply a stricter standard of review. The plaintiff, as well as the federal government which entered the case, argued that a background report is not protected since it deals with private matters, and that the information is only disseminated to an employer that purchases the services. After a lengthy review of the arguments and an analysis of the applicable law, the court concluded that the FCRA was constitutional

The Court also noted that “…the federal government enacted section 1681c of the FCRA to provide businesses with the most accurate and relevant information while simultaneously protecting the privacy right of consumers. More important, section 1681c’s speech restriction is appropriately justified.”

The ruling had the effect of denying the background firm’s effort to have the case dismissed.

(NOTE: The case is from the U.S. District Court for the Eastern District of Pennsylvania, No. 10-6850, and filed 11/06/12). It is ESR’s policy not to identify firms where a matter is only in the pre-trial state since the complaints are just allegations.)

Regardless of the eventual outcome of the lawsuit, the case demonstrates yet again that background checks are subject to ever increasing levels of litigation, legislation, and regulation. On the other hand, failure to perform background checks will almost certainly subject an employer to the legal and financial nightmare of a bad hire. The solution is a background check program done in full legal compliance.

Employment Screening Resources (ESR) utilizes a proprietary system of ESR Assured ComplianceSM to make sure that all applicant rights are provided for. In addition, ESR has a policy of using primary sources only so that all records are reviewed for accuracy. ESR does not report criminal records from databases directly to an employer without taking reasonable steps to verify that the record is current and up to date, that it belongs to the applicant, and that it is reportable under the many complex federal and state laws.